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Nigeria’s Federal Government removes US$ 1 million deposit for investors in private refineries

Hydrocarbon Engineering,

The Federal Government’s recent decision to remove the mandatory US$ 1 million deposit in place for investors planning to build private refineries has been met with positive and negative responses.

The Department of Petroleum Resources (DPR) issued a statement revealing the decision: ‘The Honourable Minister of Petroleum Resources has approved the elimination of the payment of the statutory refinery commitment deposit of US$ 1 million for every 10 000 bpd refining capacity as contained in section 11 sub section 2.1.1(iv) and section 111 sub-section 3.4.2 (iv) of the ‘Guidelines for the establishment of Hydrocarbon Processing Plant (Refinery and Petrochemicals) in Nigeria.’ The spokesperson identified this policy update as ‘part of government’s strategy to encourage private sector participation in crude oil refining and also its desire to locally refine 50% or more of Nigeria’s crude oil.’

A step in the right direction
Odein Ajumogobia, Minister of the State for Petroleum Resources, claimed that the move was implemented in a bid to encourage local and foreign investors into the refining sub sector, leading to the emergence of locally constructed refineries, an increase in capacity and the possibility of self sufficiency. This has been viewed as a commendable effort by the government, at a time when many of the surviving companies are downsizing their operations, and put in place just ahead of the full deregulation of Nigeria’s downstream industry, which will see petroleum products purchased at prices dictated by international authority.

Further action
While this move is certainly a positive step, the Federal Government’s decision has been criticised by some as insufficient to attract private investors into Nigeria’s downstream sector, and more pressing issues includes the inconsistency of policy and investors waiting for clarification on the government’s meaning of deregulation. Joe Attueyi, Chief Executive of Rehoboth Natural Resources Development Limited, said, ‘the government needs to give incentives to people who want to do the business. The downstream is not a business yet. So the first thing is to deregulate it and make it a business so that it can attract investors.’

A DPR spokesperson has confirmed that guidelines for the establishment of facilities are subject to change and review, and new applications for licenses are currently being processed.

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